Question
Cheyenne holds a $10,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stocks beta, is listed in the
Cheyenne holds a $10,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stocks beta, is listed in the following table:
| Stock | Investment | Beta | Standard Deviation |
|---|---|---|---|
| Andalusian Limited (AL) | $3,500 | 0.90 | 15.00% |
| Zaxatti Enterprises (ZE) | $2,000 | 1.90 | 12.00% |
| Western Gas & Electric Co. (WGC) | $1,500 | 1.20 | 18.00% |
| Mainway Toys Co. (MTC) | $3,000 | 0.50 | 28.50% |
Suppose all stocks in Cheyennes portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Mainway Toys Co.
Andalusian Limited
Zaxatti Enterprises
Western Gas & Electric Co.
Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?
Mainway Toys Co.
Western Gas & Electric Co.
Andalusian Limited
Zaxatti Enterprises
If the risk-free rate is 4% and the market risk premium is 5.5%, what is Cheyennes portfolios beta and required return? Fill in the following table:
| Beta | Required Return | |
|---|---|---|
| Cheyennes portfolio |
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Personal Finance Turning Money into Wealth
Authors: Arthur J. Keown
7th edition
978-0133856507, 013385650X, 133856437, 978-0133856439
